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nism-series-xb-super-top-up-vs-top-up-health-claims-case-study[ INVESTMENT ADVISER (LEVEL 2) ]
An insured has a Base Health Policy of ₹3 Lakhs and a secondary policy of ₹10 Lakhs with a ₹3 Lakh Deductible. During the year, she incurs two separate hospitalizations: Claim 1 = ₹2.50 Lakhs and Claim 2 = ₹3.50 Lakhs (Total = ₹6.00 Lakhs). What is the total insurer payout under: (Case A) Top-Up Policy, and (Case B) Super Top-Up Policy?
[ A ]Case A (Top-Up) = ₹3.50 Lakhs; Case B (Super Top-Up) = ₹6.00 Lakhs[ CORRECT ]
[ B ]Case A (Top-Up) = ₹3.00 Lakhs; Case B (Super Top-Up) = ₹6.00 Lakhs
[ C ]Case A (Top-Up) = ₹6.00 Lakhs; Case B (Super Top-Up) = ₹6.00 Lakhs
[ D ]Case A (Top-Up) = ₹3.00 Lakhs; Case B (Super Top-Up) = ₹3.00 Lakhs
Takeaway
Top-Up reimburses ₹3.50 Lakhs (₹2.50L out-of-pocket), while Super Top-Up reimburses 100% of ₹6.00 Lakhs (₹0 out-of-pocket).
Derivation
Case A, Top-Up, applies its ₹3 Lakh deductible separately to each claim. Claim 1 (₹2.5L) never crosses the ₹3L threshold on its own, so the Top-Up pays nothing on it — only the ₹2.5L Base covers it. Claim 2 (₹3.5L): Base has ₹0.5L left, which it pays first; the remaining ₹3L is compared against the deductible, and only ₹0.5L above the ₹3L threshold gets reimbursed by Top-Up. Total paid: ₹2.5L + ₹0.5L + ₹0.5L = ₹3.50L, leaving the insured ₹2.5L out of pocket. Case B, Super Top-Up, applies the deductible once against the annual cumulative total: ₹2.5L + ₹3.5L = ₹6.0L, which exceeds ₹3L by ₹3.0L. Base pays ₹2.5L + ₹0.5L, and Super Top-Up covers the full remaining ₹3.0L, so the entire ₹6.0L gets reimbursed with zero out-of-pocket cost.
Why the others fail
B — Case A (Top-Up) = ₹3.00 Lakhs; Case B (Super Top-Up) = ₹6.00 Lakhs
Forgets that Claim 2, on its own, already crosses the ₹3 Lakh Top-Up deductible by ₹0.5 Lakh, understating what the Top-Up policy actually pays out.
C — Case A (Top-Up) = ₹6.00 Lakhs; Case B (Super Top-Up) = ₹6.00 Lakhs
Incorrectly treats the Top-Up policy as if it aggregates claims across the year the way a Super Top-Up does, rather than applying the deductible per claim.
D — Case A (Top-Up) = ₹3.00 Lakhs; Case B (Super Top-Up) = ₹3.00 Lakhs
Fails to use the secondary policy's coverage in either scenario, understating both the Top-Up and Super Top-Up payouts well below their correct figures.
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